Investment Performance

Cheerful seniors in sports clothing sitting on a park bench after exercise looking at smartphone Management Discussion
and Analysis

2025 Year in Review

Assets Under Management Investment Income
$22.4 Billion $1.7 Billion
  1 Year 4 Year
Portfolio Return 7.5 % 6.5 %

After two strong years for markets in 2023 and 2024, investors entered 2025 with caution. Ongoing geopolitical tensions and uncertainty around global trade policy created questions about the path of inflation, interest rates, and economic growth.

While these concerns remained in the background throughout the year, alongside strained relationships between the U.S. and several trading partners, the global economy proved more resilient than many expected. Growth was modest, inflation pressures eased, and by mid-year the feared tariff-driven jump in inflation had not appeared as proposed trade measures were often softened or delayed when bond markets reacted negatively.

With inflation looking more contained and labour markets showing signs of cooling, central banks shifted from holding rates steady to a state of gradual easing. U.S., European, and Canadian central banks each cut rates multiple times over the course of the year.

Equity markets generally welcomed this shift toward lower rates. In technology, the AI theme continued to dominate headlines as leading companies invested heavily in data centres and new AI models, and the market became more selective about which businesses had credible, executable AI strategies. International equities outperformed U.S. stocks in 2025, helped by changes in trade policy, favourable currency moves, and improving investor confidence.

Bond markets were challenged early in the year as uncertainty pushed yields higher and weighed on returns. Conditions improved as rate cuts progressed and short-term securities performed well, while longer-term government bonds lagged as investors balanced expectations for moderate growth with concerns about larger fiscal deficits and longer-term inflation risks.

In summary, public equities delivered strong results in 2025. Results were mixed elsewhere in the portfolio, in particular illiquid private market assets faced headwinds amid valuation uncertainty against the macroeconomic backdrop. Overall, PSPP’s diversified portfolio continues to generate solid returns, 7.5% for the year and 6.5% annualized over the last four years.

“I appreciate attention to details and assistance available to assist throughout the working and retirement process.”

- Cindy J.

"I look forward to an easy adjustment to retirement and the PSPP has been helpful in getting me to this point!"

- Carrie D.

Implementation of Investment Policy

PSPP maintains a formal Statement of Investment Policy and Procedures (SIPP) inclusive of governing principles, a target mix of asset classes and allowable ranges, performance benchmarks and permissible investments to guide the implementation of the investment portfolio.

Asset Mix

The portfolio asset mix is the key consideration in meeting Plan funding objectives. As a long-term investor, PSPP seeks to build a portfolio that is resilient through economic cycles. Thus, the emphasis is on being highly diversified across asset classes and sources of income, growth, and inflation sensitivity.

Through the completion of an Asset Liability Study in the first half of 2024, the asset mix was further diversified primarily through modest increases to private market asset classes. The current SIPP features a policy allocation to the broad asset class categories of Fixed Income, Equities and Alternatives.

40% Alternatives

29% Fixed Income

31% Public Equities

Public and Private Equity assets are the highest return and highest risk category in the portfolio. These assets are expected to be the return driver within the pension funding model and are critical to meeting long-term objectives.

Fixed-income assets are the least risky assets in the portfolio and, relative to equities, are expected to deliver lower but more stable returns. Typically having a relatively low correlation to equities, they are expected to provide the portfolio with an important element of downside protection during equity market drawdowns.

With the Alternative exposure, allocations to long-lived Real Estate and Infrastructure assets typically provide stable and predictable income while offering the potential for long-run capital appreciation. Along with portfolio diversification, Real Estate and Infrastructure assets are expected to give the pension funding model a desired element of long-term inflation protection.

Geographic Exposure

The portfolio asset mix targets being diversified across key drivers of investment return and risk, including geographic considerations. Equity exposure is global in nature given its focus on sources of economic growth. Fixed-income exposure is primarily Canadian in nature given the attention to total portfolio risk management and the matching of Canadian dollar-based liabilities.

The large allocation to US assets is reflective of the relative size of the US economy and the resultant availability of institutional quality, publicly listed, and privately held assets.

Investment Management

Alberta Investment Management Corporation (AIMCo) is PSPP’s legislated provider of investment management services. Established as a Crown corporation in 2008, AIMCo provides a large-scale, multi-client investment platform with a global reach to Alberta-based public entities, including pension plans, endowments and government funds.

AIMCo implements the PSPP SIPP in the financial marketplace and supports carrying out PSPP’s decision making, oversight and monitoring responsibilities.

Investment Results

To allow a comparison of actual investment performance to a relevant target, each asset class in the Policy Asset Mix is assigned an appropriate investment performance benchmark. As well, a total portfolio performance benchmark is constructed from underlying asset class performance benchmarks and policy weights.

AIMCo has discretion within its implementation of the Policy Asset Mix to seek investment returns beyond underlying policy benchmarks. All strategies implemented within each asset class are defined by AIMCo product descriptions, inclusive of investment guidelines along with risk and return targets.

Regular review of investment results versus performance benchmarks allows PSPP to monitor the effectiveness of AIMCo’s implementation of the SIPP.

The totals on the Asset Class charts below may show mathematical differences due to rounding approximations. For the exact figures, please see the Plan Financials.

Total Fund

In 2025, strong equity markets were the main driver of the Total Fund’s 7.5% return. With positive results in three of the past four calendar years, the Total Fund also delivered a healthy four-year annualized return of 6.5%.

While the Total Fund posted a positive return, it trailed its benchmark by 1.9% in 2025, mainly due to relative weakness in Private Equity. Over the four-year period, the Total Fund underperformed the benchmark by 0.4%, reflecting the cumulative impact of below-benchmark results over the last three years.

Fixed Income

In 2025, the Fixed Income portfolio returned 2.9%, supported by gains across underlying asset classes except for Long Bonds which experienced negative returns. Over the past four years, the portfolio produced an annualized return of 1.9%, with positive results in three of the last four calendar years.

The portfolio also added value versus its benchmark, outperforming by 0.8% in 2025. Private Debt, Private Mortgages, and Universe Bonds were the key contributors, and together helped Fixed Income outperform by 0.5% over the four-year period.

Asset Classes

The Fixed Income portfolio has over $6.6 Billion allocated across underlying public and private market asset classes.

Given the floating interest rate feature underlying most of its assets, the Private Debt & Loan portfolio exhibited strong 1-year and 4-year absolute and relative returns. Other asset classes have performed as expected against the prevailing macroeconomic backdrop.

“PSPP = coverage now to afford stability after retirement.”

- Maryna R.

"PSPP means peace of mind for my future."

- Mary-Anne F.

Public Equities

In 2025, public equities were a key source of strength. Very strong results in Global Equities and Emerging Markets helped the Public Equity portfolio return 17.7%. With strong gains in three of the last four calendar years, the portfolio delivered a solid four-year annualized return of 12.2%.

The portfolio also modestly outperformed its benchmark in 2025, adding 0.8%. Strong relative performance in Global Equities was the main positive contributor, partly offset by weaker relative results in Emerging Markets. Over the past four years, Global Equities continued to add value, helping the Public Equity portfolio outperform its benchmark by 0.5%.

Asset Classes

The Public Equity portfolio has over $7.9 Billion allocated across underlying developed and emerging market asset classes. Over 85% of the exposure is in developed markets.

Driven primarily by US equities, the developed market portfolio significantly outperformed the emerging market portfolio over a 4-year period, both on an absolute and relative basis.

Alternatives

In 2025, weak absolute performance from Real Estate weighed on the Alternatives portfolio, resulting in a return of 1.7% for the year. Over the past four calendar years, performance has been more mixed across underlying strategies, with the portfolio generating a four year annualized return of 4.2%.

Relative to its benchmark, the Alternatives portfolio underperformed by 6.3% in 2025, driven primarily by Private Equity results. Over the four year period, the portfolio underperformed its benchmark by 1.8%, reflecting relative headwinds in both Private Equity and Real Estate.

Asset Classes

The Alternatives portfolio has over $7.8 Billion allocated across underlying illiquid private market asset classes.

The recent 4-year period featured significant volatility in absolute and relative returns across all illiquid asset classes. Apart from Real Estate, strong 4-year absolute returns were experienced in each asset class. From a relative return perspective, Infrastructure was the only asset class experiencing outperformance over the same period.

Responsible Investing

Framework

PSPP’s Responsible Investment Policy guides the integration of environmental, social and governance (ESG) factors across the investment process. Plan assets are managed exclusively in the financial interest of Plan beneficiaries; however, ESG factors, including environmental and climate impact, social practices, and governance structures, can represent significant long-term risks to the financial health of the Plan.

PSPP has adopted the United Nations-led Principles for Responsible Investment (PRI) as a practical framework to manage responsible investment considerations. PSPP delegates the implementation of its Responsible Investment Policy and proxy voting process to its asset manager, AIMCo. AIMCo must uphold the PRI and integrate ESG factors into its investment decision-making and stewardship activities accordingly.

Active Ownership: Proxy Voting & Engagements

Proxy voting is a fundamental tenet of shareholder rights, providing a mechanism for shareholders of publicly traded companies to affect important corporate governance and ESG matters at annual general meetings (AGMs) or special shareholder meetings. For the annual 2025 proxy voting season (12-months ending June 30, 2025), AIMCo, on behalf of all clients including PSPP, voted at/on:

  • 3,752 meetings and 41,102 ballot items; and
  • 770 shareholder proposals - with a 13% year-over-year decrease in proposals.

Shareholder engagement complements proxy voting. As our investment manager, AIMCo conducted 107 engagements (a 4% year-over-year decrease) in 2025 to spur ongoing, constructive dialogue with investee company boards, management teams, and external managers across public and private market holdings. When investee companies better understand the views of asset owners and managers on material ESG issues, they are more likely to drive positive change that enhances the long-term value of our investments, consistent with our fiduciary duty.

Management Discussion and Analysis

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Plan Funding

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Investment Performance

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Plan Financial Highlights

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Pension Administration

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